2022 IL App (2d) 200780 Nos. 2-20-0780 & 2-21-0301 cons. Opinion filed April 21, 2022 ______________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
SECOND DISTRICT ______________________________________________________________________________
THE VILLAGE OF KIRKLAND, ) Appeal from the Circuit Court ) of De Kalb County. Plaintiff-Appellant, ) ) v. ) No. 19-L-33 ) KIRKLAND PROPERTIES HOLDINGS ) COMPANY, LLC I, and KIRKLAND ) PROPERTIES HOLDINGS COMPANY, ) LLC II, ) Honorable ) Bradley J. Waller, Defendants-Appellees. ) Judge, Presiding. ______________________________________________________________________________
JUSTICE BRENNAN delivered the judgment of the court, with opinion. Justices McLaren and Hudson concurred in the judgment and opinion.
OPINION
¶1 On August 27, 2020, plaintiff, the Village of Kirkland (Village), filed its third amended
complaint against defendants, Kirkland Properties Holdings Company, LLC I, and Kirkland
Properties Holdings Company, LLC II (hereinafter KPHC I, KPHC II, and collectively KPHC). In
the complaint, the Village alleged that KPHC breached a 2003 recorded annexation agreement
(Annexation Agreement) that the Village entered into with the National Bank and Trust of
Sycamore as trustee of trust No. 4235000 (landowner), the original owner of the subject property,
a 114-acre subdivision. The Village alleged that KPHC became bound by the terms of the
Annexation Agreement as a successor owner of record to the landowner when KPHC bought a 2022 IL App (2d) 200780
portion of the subject property from an entity, Plank Road, LLC (Plank) (not a party to this appeal),
which had, in turn, acquired the property from the landowner. Specifically, the complaint alleged
that KPHC breached the Annexation Agreement by refusing the Village’s request for a letter of
credit in the amount proportionate to the number of lots KPHC owned in the subdivision, to secure
the completion of roads in the subdivision as it was developed. The Village sought damages for
breach of contract or, in the alternative, injunctive relief in the form of specific performance.
KPHC moved to dismiss pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-
615 (West 2020)), arguing at the hearing on the motion that, although the Annexation Agreement
was a covenant that ran with the land, the Annexation Agreement would not confer successor status
to an entity that purchased only a portion of the subject property as opposed to the whole of the
subject property. The trial court, relying primarily on Doyle v. Village of Tinley Park, 2018 IL App
(1st) 170357, and briefly referencing United City of Yorkville v. Fidelity & Deposit Co. of
Maryland, 2019 IL App (2d) 180230, agreed with KPHC and dismissed the case with prejudice.
The Village timely appeals (No. 2-20-0780), arguing that Doyle, a First District case, is
distinguishable and that Yorkville, a Second District case, actually supports its position.
¶2 Having secured the dismissal of the complaint against it, KPHC moved for attorney fees
pursuant to the terms of the Annexation Agreement. The trial court determined that the Annexation
Agreement entitled KPHC, as the prevailing party in a lawsuit brought pursuant to the Annexation
Agreement, to fees. The Village appeals (No. 2-21-0301), arguing, inter alia, that the court’s
earlier ruling that KPHC was not bound by the terms of the Annexation Agreement precluded it
from awarding attorney fees under the Annexation Agreement. The two appeals, Nos. 2-20-0780
and 2-21-0301, have been consolidated for the purposes of argument and disposition (but not
briefing). For the reasons that follow, we reverse the trial court’s ruling that KPHC was not bound
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by the terms of the Annexation Agreement. As a result, KPHC is no longer the prevailing party
and we vacate the award of attorney fees.
¶3 I. BACKGROUND
¶4 The following background information is taken largely from the allegations of fact set forth
in the third amended complaint, which must be taken as true at this stage in the proceedings. See
Cochran v. Securitas Security Services USA, Inc., 2017 IL 121200, ¶ 11.
¶5 A. The Annexation Agreement
¶6 On May 5, 2003, the Village entered into the Annexation Agreement with the sole, original
owner of the subject property, the landowner, at that time, the Trust, the beneficiaries of which
were David R. Rood, Barbara L. Rood, Robert D. Rood, and Ann M. Rood. As to its term and the
question of successorship, the Annexation Agreement provided that it was for a term of 20 years
and that it was “made pursuant to and in accordance with [sections 11-15.1-1 to 11-15.1-5] of the
[Municipal] Code.” Section 11-15.1-4 of the Municipal Code, in turn, provides: “Any annexation
agreement executed pursuant to this Division 15.1 *** shall be binding upon the successor owners
of record of the land which is the subject of the agreement and upon successor municipal
authorities of the municipality and successor municipalities.” (Emphasis added.) 65 ILCS 5/11-
15.1-4 (West 2002). The Annexation Agreement, section 28, paragraph I, likewise provided that
it was “[b]inding on Assigns. All terms and provisions of this Agreement shall be binding upon,
inure to the benefit of, and be enforceable by the parties hereto, their heirs, executors,
administrators, successors[,] and assigns.” (Emphasis added.)
¶7 The Annexation Agreement described the subject property as consisting of 114.27 acres
located immediately north of Illinois Route 72 and presently contiguous with the corporate limit
of the Village. It provided in its introductory terms that the subject property was to be developed
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and specifically that (1) the landowner desired to annex the subject property to the Village “to
develop thereon a residential subdivision substantially in accordance with a preliminary
subdivision plat *** which is attached hereto,” and (2) the parties desired to develop the subject
property “as conveniently as may be and subject to the terms and conditions hereinafter contained.”
¶8 The Annexation Agreement placed obligations on the Village, including but not limited to
the following. The Village was to annex the subject property to the Village. It was to rezone the
subject property for single-family residential homes and approve and record two plats for
subdivision. It was to provide water mains, access to Village treatment plant services, and potable
water for the subdivision.
¶9 The Annexation Agreement also placed obligations on the landowner, including but not
limited to those set forth in sections 10 and 14. Section 10 provided that the landowner was to
construct all roadways required to be developed on the subject property. With certain exceptions,
the roadways were to be constructed in accordance with the Village’s standards. Once 50% of the
buildings in a particular phase were occupied, no further occupancy permits would be issued unless
the road was complete to a certain stage of development. Once 80% of the buildings in a particular
phase were occupied, no further occupancy permits would be issued unless the road was complete
to a certain, later stage of development. Upon the completion of the road, the Village would accept
the improvements and thereafter maintain the road.
¶ 10 Section 14 provided that the landowner would secure an irrevocable letter of credit from a
financial institution payable to the Village to guarantee the quality construction of all public
facilities to be constructed at any unit or stage of development for which approval is sought. The
letter of credit would be in the amount of 100% of the contract costs of construction in the unit or
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stage of development or 125% of the landowner engineer’s contract estimate in the unit or stage
of development.
¶ 11 Other sections of the Annexation Agreement, including those addressing stages and phases
of development (section 5) and the dedication of improvements (section 13), will be discussed
later in conjunction with our interpretation of the agreement.
¶ 12 B. The Transfer of Portions of the Subject Property
¶ 13 On November 30, 2011, the landowner sold a portion of the subject property to Plank, as
is documented in exhibit I attached to the Village’s complaint. At that time (and at all times
relevant to this appeal), the subject property had been divided into 82 lots across two phases of
development. Plank purchased 41 lots, some of which were located in phase one and some of
which were located in phase two.
¶ 14 On January 25, 2017, Plank sold 34 lots to KPHC. As a result, KPHC I owned 15 of 56
lots in phase one, and KPHC II owned 19 of 26 lots in phase two. The third amended complaint
alleged that “the contract by which [KPHC] acquired *** the lots provides that title to the lots was
subject to all ‘agreements with any municipality regarding the development of the Property.’ ”
¶ 15 C. The Village Seeks KPHC’s Performance
¶ 16 Meanwhile, as KPHC does not dispute, the Village continued to perform under the
Annexation Agreement in that it annexed the subject property to the Village, rezoned the subject
property to allow for single-family residences, and approved two final plats for subdivision. It also
provided lots within the subdivision with access to Village treatment plant services, water mains,
and potable water.
¶ 17 On May 8, 2019, the Village sent KPHC letters of demand based on sections 10 and 14 of
the Annexation Agreement. It requested that KPHC deposit a letter of credit for an amount
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proportionate to the number of lots it owned in the development and/or the road frontage of such
lots in order to secure the completion of the roads in the development. The Village calculated that,
based on the total contract estimate for the completion of the roads in the entire development and
KPHC’s share of ownership, KPHC’s letter of credit was to be for $357,295. KPHC did not supply
the letter of credit, and the Village filed suit. Following a series of amended pleadings, KPHC
moved to dismiss the Village’s third amended complaint, the operative complaint in this case,
pursuant to section 2-615 of the Code of Civil Procedure.
¶ 18 D. The Trial Court’s Ruling
¶ 19 On December 4, 2020, the trial court conducted a hearing on KPHC’s motion to dismiss.
Primarily, the parties debated whether KPHC was a successor owner of record to the subject
property such that it was bound by the terms of the Annexation Agreement. KPHC acknowledged
that the Annexation Agreement concerned a covenant that ran with the land. The question for the
court, it continued, was what land. In KPHC’s view, the covenant ran with the land in its entirety,
only. Once the land was sold in any configuration less than its entirety, the covenant ceased to
apply. KPHC argued that its position was supported by Doyle, which it asserted stood for the
proposition that, where the original parties to an annexation agreement intend for the covenant to
run with the land, even when subdivided and portioned off to different developers, the annexation
agreement must so expressly provide.
¶ 20 The Village responded that the Annexation Agreement concerned a covenant that ran with
the land whether in its entirety or subdivided and portioned off to different developers. The Village
argued that the Annexation Agreement was premised upon and contemplated subdivision of the
land. The Village referred, specifically, to those provisions concerning infrastructure and storm
water requirements that would be “completely unnecessary” if the Annexation Agreement were to
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apply only to a property owner who retained the whole acreage. It also argued that KPHC’s
interpretation of the Annexation Agreement led to an absurd result in that, under KPHC’s
interpretation, KPHC would have no standing to sue the Village to compel it to fulfil its obligation
to provide water service, for example, merely because the property had been subdivided. If, in a
hypothetical scenario, KPHC owned 99 of 100 lots, KPHC still would not have standing. Finally,
the Village argued that Doyle was factually distinguishable, factually unique, and had limited
precedential value.
¶ 21 In rebuttal, KPHC acknowledged that, under its interpretation, it had no standing to compel
the Village to fulfil its obligations under the Annexation Agreement: “[T]rust me, that’s a problem
in this case, because we have a neighborhood that is not developed, despite [the Village] once
having an adequate security bond. So this ruling will cut both ways.” KPHC also asserted that the
Second District embraced the Doyle decision in Yorkville.
¶ 22 The trial court granted KPHC’s motion to dismiss. It explained that section 11-15.1-1 of
the Municipal Code provides that an annexation agreement is a contract between a municipality
and an owner of land. Section 11-15.1-4 further provides that the annexation agreement will be
binding on successor owners of the land that is the subject of the agreement. In this case, the subject
property “consists of 114.27 acres located north of [Route 72]. That is for all intents and purposes
the entire subdivision.” It concluded:
“The agreement, like [section 11-15.1-4], is silent on the purchase *** of less than
all of the *** subject property.
Doyle states that if the drafters [of an annexation] agreement intended to confer
successor status upon each and every purchaser of a lot within a subdivision as opposed to
a developer who purchased the entire subdivision, the agreement would have expressly
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stated successor owners of record of the subject property *** and/or any portion thereof.
It didn’t in Doyle and it doesn’t here.” (Emphasis added.)
The court also referenced Yorkville, finding it distinguishable in that the annexation agreement in
that case contained a provision that acknowledged that a successor developer could own a portion
of the subject property. The court also stated that the Village had failed to plead the existence of
any other form of privity between itself and KPHC, such as contractual assignment. In the court’s
view, that the deed between Plank and KPHC stated that KPHC took title subject to the terms of
any municipal agreement merely raised the question of how the terms of the Annexation
Agreement should be interpreted. As such, the court determined that the Village had failed to state
a cause of action and granted KPHC’s section 2-615 motion to dismiss.
¶ 23 The trial court’s written order provided: “For the reasons stated on the record, defendant’s
motion to dismiss is granted.” The court awarded KPHC attorney fees pursuant to a fee-shifting
provision in the Annexation Agreement. This properly noticed appeal followed.
¶ 24 II. ANALYSIS
¶ 25 On appeal, the Village challenges the trial court’s section 2-615 dismissal of its third
amended complaint for breach of contract (seeking damages) and injunctive relief (seeking
specific performance). To properly plead the first of these actions, breach of contract, a plaintiff
must allege facts supporting the following elements: (1) the existence of an operative contract,
(2) a breach of the contract, (3) plaintiff’s performance of its duties under the contract, and
(4) damages. Village of Orland Park v. First Federal Savings & Loan Ass’n of Chicago, 135 Ill.
App. 3d 520, 529 (1985). As to the second action, section 11-15.1-4 of the Municipal Code
provides that any party to an annexation agreement “may by civil action, mandamus, injunction[,]
or other proceeding, enforce and compel performance of the agreement.” 65 ILCS 5/11-15.1-4
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(West 2020). The question presented by each of these claims is whether KPHC was bound by the
terms of the Annexation Agreement, as a successor owner of record of land subject to the
agreement, such that it can be found to have breached the agreement by failing to provide a letter
of credit and such that it can be compelled to provide the letter of credit. The Village argues that
KPHC is bound by the terms of the Annexation Agreement because the Annexation Agreement is
a covenant that runs with the land and section 11-15.1-4 of the Municipal Code as well as the
Annexation Agreement itself provide that it is binding on successors of the land that is the subject
of the agreement. The Village contends that the trial court erred in determining that KPHC was
not bound by the terms of the Annexation Agreement as a successor owner of record because
KPHC owned only a portion of the land that was the subject of the Annexation Agreement. It also
challenges the trial court’s decision to award KPHC attorney fees. For the reasons that follow, we
agree that KPHC was a successor owner of record of the subject property even though it owned
only a portion of the subject property. Because KPHC is no longer the prevailing party, it is not
entitled to attorney fees.
¶ 26 Preliminarily, we address KPHC’s argument that the Village cannot state a claim for
injunctive relief in the form of specific performance by securing a letter of credit, because the
Village has an adequate remedy at law precluding equitable relief—damages under its breach of
contract claim. Specific performance is a form of injunctive relief. New Park Forest Associates II
v. Rogers Enterprises, Inc., 195 Ill. App. 3d 757, 761 (1990). To be sure, ordinarily, injunctive
relief is not appropriate when there is an adequate remedy at law, here, damages. Id. However,
when, as here, a party grounds its request for specific performance in section 11-15.1-4, which
specifically provides for injunctive relief, the action remains viable despite the availability of other
possible avenues of relief. See Orland Park, 135 Ill. App. 3d at 528-29.
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¶ 27 A section 2-615 motion to dismiss challenges the legal sufficiency of the complaint and
asserts that the plaintiff has failed to state a cause of action. 735 ILCS 5/2-615 (West 2020). When
ruling on a section 2-615 motion to dismiss, the trial court must accept as true all well-pled facts,
as well as any reasonable inferences that may arise from them. Cochran, 2017 IL 121200, ¶ 11.
We review section 2-615 dismissals de novo. Id. Here, the trial court’s dismissal was guided by its
interpretation of section 11-15.1-4 of the Municipal Code and the Annexation Agreement, issues
that are also subject to de novo review. Valerio v. Moore Landscapes, LLC, 2021 IL 126139, ¶ 20.
¶ 28 When construing a statute or contract, the primary goal is to give effect to the intent of the
parties who drafted the document. Yorkville, 2019 IL App (2d) 180230, ¶ 74. The best indicator of
intent is the language of the document, given its plain and ordinary meaning. Id. The court will not
read into the document a provision it does not contain. See Carrillo v. Jam Productions, Ltd., 173
Ill. App. 3d 693, 698 (1988). The document is to be read as a whole (Gallagher v. Lenart, 226 Ill.
2d 208, 233 (2007)) and should be reasonably interpreted to avoid absurd results (Foxfield Realty,
Inc. v. Kubala, 287 Ill. App. 3d 519, 524 (1997)).
¶ 29 As we look to the text of the statute and the Annexation Agreement, we are mindful that
public policy favors the enforcement of annexation agreements. Orland Park, 135 Ill. App. 3d at
526. Annexation agreements are critical to the successful implementation of municipal
improvements. See id. As the Orland Park court explained:
“The authorization of preannexation agreements by statute, such as section 11-15.1-
1, serves to further important governmental purposes, such as the encouragement of
expanding urban areas and to do so uniformly, economically, efficiently and fairly, with
optimum provisions made for the establishment of land use controls and necessary
municipal improvements including streets, water, sewer systems, schools, parks, and
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similar installations. This approach also discourages fragmentation and proliferation of
special districts. Additional positive effects of such agreements include controls over
health, sanitation, fire prevention and police protection, which are vital to governing
communities.” Id.
One of the ways the legislature has ensured that annexation agreements will be enforced is by
empowering and holding accountable successor owners to the terms of the annexation agreement.
Id.
¶ 30 As mentioned, section 11-15.1-4 of the Municipal Code addresses successor status and
provides:
“Any annexation agreement executed pursuant to this Division 15.1 *** shall be
binding upon the successor owners of record of the land which is the subject of the
agreement and upon successor municipal authorities of the municipality and successor
municipalities. Any party to such agreement may by civil action, mandamus, injunction or
other proceeding, enforce and compel performance of the agreement.” 65 ILCS 5/11-15.1-
4 (West 2002).
¶ 31 Also as mentioned, section 28 of the Annexation Agreement provides that it is binding on
successors: “Binding on Assigns. All terms and provisions of this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the parties hereto, their heirs, executors,
administrators, successors[,] and assigns.” (Emphasis added.)
¶ 32 Turning to the parties’ specific arguments, we first consider whether the Annexation
Agreement is a covenant that runs with the land. When a covenant runs with the land, the benefit
or obligation of the covenant will pass with ownership. La Salle National Trust, N.A. v. Village of
Westmont, 264 Ill. App. 3d 43, 71 (1994). An annexation agreement is a covenant that runs with
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the land if three requirements are met: (1) the grantor and grantee intended it to run with the land,
(2) it touches and concerns the land, and (3) there is privity of estate between the party claiming
the benefit of the covenants and the party resting under the burden of the covenant. Streams Sports
Club, Ltd. v. Richmond, 99 Ill. 2d 182, 188 (1983).
¶ 33 Here, as to the first requirement, language commonly used to demonstrate intent to create
a servitude includes statements that the interests created “run with the land” or that they “bind” to
the benefit of “heirs,” “assigns,” or “successors” of the drafting parties. Restatement (Third) of
Property § 2.2 cmt. d (2000). Section 28 of the Annexation Agreement stated that it was “binding
upon *** [the] heirs, executors, administrators, successors[,] and assigns,” and the parties to the
agreement recorded it. This demonstrates that the parties intended the Annexation Agreement to
run with the land.
¶ 34 As to the second requirement, a covenant touches and concerns the land if it “affects the
use, value and enjoyment *** of the property.” (Internal quotation marks omitted.) In re
Application of the County Treasurer & ex officio County Collector, 373 Ill. App. 3d 679, 690
(2007). Here, the very purpose of the Annexation Agreement is to annex the property to the Village
so that it can be developed. The agreement addresses, inter alia, the annexation and platting of the
subject property, stormwater drains on the subject property, wastewater treatment on the subject
property, well and water supply and distribution on the subject property, and construction of
roadways on the subject property. This demonstrates that the Annexation Agreement affects the
use, value, and enjoyment of the subject property.
¶ 35 As to the third requirement, privity is defined as “[t]he connection or relationship between
two parties, each having a legally recognized interest in the same subject matter (such as a
transaction, proceeding, or piece of property).” Black’s Law Dictionary (11th ed. 2019). Privity of
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estate, in particular, is defined as “[a] mutual or successive relationship to the same right in
property.” Id. The Annexation Agreement clearly provides that it is binding on successors, and
thus, the Village and a successor owner each have a legally recognized interest in the same subject
matter—the development of the subject property.
¶ 36 Though KPHC at oral argument half-heartedly argued that the Annexation Agreement did
not run with the land, this is contrary to the position it took at the December 4, 2020, hearing
below, where it conceded that the Annexation Agreement was a covenant that ran with the land.
Consistent with our foregoing analysis, not to mention the prohibition against taking a contrary
position on appeal (Sakellariadis v. Campbell, 391 Ill. App. 3d 795, 800 (2009)), we hold KPHC
to its position that the Annexation Agreement runs with the land. But as KPHC notes, this raises
the question “what land?”
¶ 37 Section 11-15.1-4 of the Code, which provides that an annexation agreement “shall be
binding upon the successor owners of record of the land which is the subject of the agreement”
(emphasis added) (65 ILCS 5/11-15.1-4 (West 2002)), neither expressly provides for nor expressly
precludes the application of the terms of the annexation agreement when a subsequent owner owns
just a portion of the land that is the subject of the agreement, as opposed to all the land that was
subject to the agreement. Similarly, the Annexation Agreement, which provides that it is governed
by the Municipal Code and is binding on “the parties hereto, [and] their *** successors,” neither
expressly provides for nor expressly precludes the application of its terms to subsequent owners
of a portion of the property originally subject to the Annexation Agreement. KPHC, citing Doyle,
argues that, unless the Annexation Agreement expressly provides that the agreement is binding on
successor owners of the subject property or any portion thereof, then it is binding only on successor
owners of the subject property in its entirety. The Village, citing Yorkville, argues that there are no
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magic words and that, when read in its entirety, it is clear that the drafters of the Annexation
Agreement contemplated that the subject property would be subdivided and developed in phases,
potentially by more than one developer. As such, the Village urges, the Annexation Agreement
continues to apply to a subsequent owner who owns just a portion of the subject property. Our
review of Doyle and Yorkville, as well as another Second District case, City of Elgin v. Arch
Insurance Co., 2015 IL App (2d) 150013, leads us to conclude that the Village is correct. We
summarize the relevant portions of Doyle, Yorkville, and Elgin below.
¶ 38 A. Doyle, Yorkville, and Elgin
¶ 39 Doyle addressed whether the purchasers of a single residential home built on a lot
encompassed by a 1990 annexation agreement could sue the developer, pursuant to the annexation
agreement, for the improper design and construction of a sewer system. Doyle, 2018 IL App (1st)
170357, ¶ 1. The agreement defined the subject property as an 828-acre parcel of land contiguous
with the village. Id. ¶ 4. The agreement obligated the developer to design and construct a sewer
system. Id. In 2004, the developer and the homeowners entered into a contract to build one
residential home on a single lot within the subdivision. Id. ¶ 5. The contract contained a limited
warranty requiring the developer to fix any defects due to faulty construction within one year from
the date of closing. Id. In 2007, the homeowners began noticing problems with the sump pump
and the sewer system. Id. ¶ 6. Between 2009 and 2011, the homeowners worked with the village
to repair the sewer system as it affected their home, but the home was structurally damaged in the
interim. Id. ¶¶ 7-16.
¶ 40 The homeowners filed suit against the developer, alleging that it had breached its duty
under the annexation agreement to install a working sewer system. Id. ¶ 17. The homeowners
asserted standing to sue under the annexation agreement as successors to the agreement to the
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extent that they were successor owners of record under the agreement’s successor liability clause.
Id. The agreement’s successor liability clause provided: “ ‘This Agreement shall be binding upon
and inure to the benefit of the parties hereto, successor owners of record of the Subject Property,
assignees, lessees and upon any successor municipal authorities of said Village and successor
municipalities ***.’ ” Id.
¶ 41 The trial court dismissed the homeowners’ claim against the developer, determining that
they did not have standing to sue the developer for breach of the annexation agreement. Id. ¶ 20.
In doing so, it concluded that, “although the annexation agreement provided for successor liability,
the [homeowners] were successors to [the developer] and not the village, so they could not sue
[the developer] for its alleged breach of the agreement.” Id.
¶ 42 The appellate court affirmed the trial court’s dismissal, but on a different theory. The
appellate court explained that neither the language of the statute nor the language of the annexation
agreement supported the homeowners’ position that they were “successor owners of record.” Id.
¶¶ 30-31. Addressing the language of the statute, the court noted that the statute refers to
“ ‘successor owners of record of the land which is the subject of the agreement’ (65 ILCS 5/11-
15.1-4 (West 2012)) but makes no reference to those who purchase only a small portion of that
land.” Id. ¶ 31. The court then explained: “[The homeowners] do not cite to any cases where
homeowners who purchase a single lot from a larger annexed territory are considered ‘successor
owners of record’ under the statute, nor does our research disclose any.” Id.
¶ 43 Addressing the language of the agreement, the appellate court explained:
“The agreement define[d] the ‘Subject Property’ as an 828-acre parcel of land contiguous
with the village—i.e., the entire subdivision. If the drafters of the agreement intended to
confer successor status upon each and every purchaser of a lot within the subdivision (as
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opposed to, say, a developer who purchased the entire subdivision property from [the
developer]), the agreement would have said ‘successor owners of record of the Subject
Property or any portion thereof.’ ” (Emphasis in original.) Id. ¶ 30.
¶ 44 In support of its position, the appellate court reasoned that the homeowners’ interpretation
of the statute and the annexation agreement would lead to an absurd result. Id. ¶ 32. Under the
homeowners’ interpretation, each and every homeowner in the subdivision would stand in the
developer’s shoes and be bound by the developer’s obligations. Id. As a result, the village could
sue any homeowner for failing to design and construct storm sewers in accordance with the
agreement. Id.
¶ 45 As an aside, the appellate court noted that the homeowners’ argument was logically flawed
along the lines of the trial court’s finding. See id. ¶ 32 n.3. That is, even if the homeowners were
successor owners of record, they would succeed to the developer’s interest in the annexation
agreement, not the village’s, and, therefore, they could not sue the developer for breach of the
annexation agreement because they would in effect be suing themselves. Id.
¶ 46 Our decision in Yorkville involved an annexation agreement between the city on one side
and the owners and the original developer on the other. Yorkville, 2019 IL App (2d) 180230, ¶ 1.
The agreement defined the subject property as a 300-acre parcel of land contiguous with the city.
Id. ¶ 6. The agreement required the original developer to complete public improvements in the
subdivision. Id. ¶ 1. However, before the improvements were completed, the original developer
went bankrupt. Id. Subsequently, two new developers purchased portions of the subject property.
Id. However, they took the position that they were not bound by the annexation agreement to
complete the improvements, because, inter alia, each new developer owned just a portion of the
subject property. Id. The city sued the new developers. Id. The trial court dismissed the city’s
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complaint. Id. ¶¶ 43-44. In reversing the trial court’s dismissal, this court began by addressing the
terms of the annexation agreement. See id. ¶ 70.
¶ 47 The annexation agreement provided that it was entered into pursuant to the Municipal
Code. Id. Its successor liability clause provided:
“ ‘22. GENERAL PROVISIONS
***
B. Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the OWNERS, DEVELOPER and their successors in title and interest, and
upon the CITY, and any successor municipalities of the CITY. It is understood and agreed
that this Agreement shall run with the land and as such, shall be assignable to and binding
upon each and every subsequent grantee and successor in interest of the OWNERS and
DEVELOPER, and the CITY.’ ” Id. ¶ 72.
The annexation agreement clarified that a purchaser of lots for the purpose of personal residential
occupation was not a successor bound by the terms of the annexation agreement. Id. ¶¶ 72, 85, 93.
Further, the annexation agreement contained a provision outside the successor liability clause,
section 9, which “refer[ed] to the rights and duties of ‘DEVELOPER and all successor developers
of the PROPERTY or any parcel or phase thereof.” (Emphasis omitted.) Id. ¶ 90. (The full text of
section 9 was not provided.)
¶ 48 The new developers argued that allowing the purchaser of less than the entire subject
property to be bound by the terms of the annexation agreement would lead to an absurd result in
that “ ‘a purchaser who buys even one empty lot in the subdivision would be responsible for
performing all of the public improvements for the subdivision as a whole.’ ” (Emphasis in original.)
Id. This court rejected the new developers’ argument, explaining that nothing in the annexation
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agreement required the responsibility for public improvements to fall entirely on one developer at
a time. Id. We noted that the agreement did not place any restrictions on the severability of the
subject property. Id. Specifically,
“section 22.B [(i.e., the successor liability clause)] places no restriction on the number of
successor developers that may exist at any given time, each having succeeded to the duties
of the original developer ***. Those duties would not fall entirely on any particular one of
those successor developers but would be shared among them.” Id.
This court further noted that section 9 of the agreement “refers to the rights and duties of
‘DEVELOPER and all successor developers of the PROPERTY or any parcel or phase thereof.”
(Emphasis omitted.) Id. “Construed together, section 9 and section 22.B indicate that development
duties can indeed fall on a developer that owns less than the entire ‘PROPERTY,’ in which case
the liability will be proportionate to the amount of property that the developer owns.” Id. ¶ 99.
¶ 49 As for Doyle, we disagreed with its analysis of section 11-15.1-4:
“[In analyzing] section 11-15.1-4, we think that the court should have contrasted
two types of parties who purchase from the original developer a portion of subdivided land
that is the subject of an annexation agreement. The first is a party who, like the plaintiffs
in Doyle, purchases a lot in order to construct, or have constructed, a residence for himself.
The second is a party—namely a developer—who purchases lots in order to construct
homes for third-party buyers. We agree with the Doyle court that it would be unfair to
impose the obligations of an annexation agreement upon the first type of purchasers.
However, it would be eminently fair to impose those obligations upon the second type—
developers—even though, like the first type, they do not purchase the entirety of ‘the land
which is the subject of the [annexation] agreement.’ See 65 ILCS 5/11-15.1-4 (West 2002).
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Not uncommonly, a unitary tract of land governed by an annexation agreement is later
divided and sold to different developers, as happened in this case. The public policy in
favor of ensuring the fulfillment of an annexation agreement [citation] would be frustrated
if the succession of duties under section 11-15.1-4 continued only as long as the land
remained under common ownership.” Id. ¶ 100.
Yorkville acknowledged that the distinction between the two types of purchasers, residential
homeowners and developers, is not apparent on the face of section 11-15.1-4. Id. ¶ 101.
¶ 50 However, we also easily distinguished the annexation agreement at issue from that in
Doyle. Id. ¶ 99. We noted that the annexation agreement referred to the rights and duties of the
“ ‘DEVELOPER and all successor developers of the PROPERTY or any parcel or phase
thereof,’ ” indicating that the drafters contemplated that the subject property might eventually be
owned by more than one developer, whereas the annexation agreement in Doyle contained no such
provision. (Emphasis omitted.) Id.
¶ 51 In considering the precedential value of Doyle and Yorkville, we begin by agreeing with
the Village that Doyle presents an irregular and easily distinguishable fact pattern. In Doyle, the
homeowner illogically sought to stand in the shoes of the developer, as successor, and then sue the
developer, i.e., itself. See Doyle, 2018 IL App (1st) 170357, ¶ 32 n.3. Substantively, Doyle’s
absurd-results analysis, adopted by the trial court in the case sub judice, reasons one step too far.
The Doyle court stated that, if it accepted the homeowners’ interpretation of the successor liability
provision that a subsequent owner of a portion of the subject property was a successor, it would
lead to the absurd result that each and every homeowner in the subdivision would stand in the
developer’s shoes and be bound by the developer’s obligations. Id. ¶ 32. While the Doyle court
correctly concluded that it would be absurd to equate individual homeowners (who have purchased
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already-developed lots for personal residential use) with successor developers (or investors
involved in the development process), it does not follow that it would be similarly absurd to confer
successor status on a developer who purchases a portion of the subject property.
¶ 52 As this court stated in Yorkville: “Not uncommonly, a unitary tract of land governed by an
annexation agreement is later divided and sold to different developers, as happened in this case.
The public policy in favor of ensuring the fulfillment of an annexation agreement [citation] would
be frustrated if the succession of duties under section 11-15.1-4 continued only as long as the land
remained under common ownership.” Yorkville, 2019 IL App (2d) 180230, ¶ 100. Therefore,
although the Yorkville annexation agreement expressly referred to successors who owned just a
portion of the subject property, whereas the Annexation Agreement in our case does not, the public
policy concerns expressed in Yorkville are equally compelling in the instant case.
¶ 53 The view that proportionate responsibility under an annexation agreement is a common
and workable scenario is further supported by this court’s opinion in Elgin, 2015 IL App (2d)
150013. In that case, the surety guaranteeing the original developer’s performance under an
annexation agreement filed a counterclaim against a successor developer. Id. ¶ 7. In determining
that the surety’s counterclaim should survive dismissal, the appellate court accepted, for the
purposes of the pleading, that the successor developer was bound by the terms of the annexation
agreement even though it owned just a portion of the subject property. Id. ¶ 21. Moreover, it
rejected the successor developer’s argument that the surety failed to add as necessary parties the
individual homeowners who had purchased their homes from the original developer. Id. ¶ 39. First,
it found forfeited the new developer’s argument that the annexation agreement imposes on those
individual homeowners an obligation to complete the improvements set forth therein. Id. Forfeiture
aside, it noted that the annexation agreement
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“[did] not impose a universal and unlimited obligation to make all improvements anywhere
in the development upon anyone who purchased property in the development. Rather, it
imposes upon purchasers the obligations ‘of the Developer *** for the parcel sold.’ Thus,
the obligations imposed upon any particular purchaser depend upon the obligations of [the
original developer] that remain unsatisfied with respect to the specific ‘parcel sold.’ If these
obligations have already been satisfied with respect to the parcel—as would be the case
where [the original developer] or some other entity had already completed the
improvements at issue with respect to the homes that were sold—the individual purchasing
homeowners would not be subject to any liability ***. Accordingly, they would not have
an interest requiring protection.” (Emphasis added.) Id. ¶ 40.
Thus, this court in Elgin declined to subscribe to the Doyle court’s concern that conferring
successor status on those who purchase a portion of the subject property such that they will be
bound by an annexation agreement would have the unintended consequence of burdening ordinary
homeowners with municipal development responsibilities. With our review of Doyle and Yorkville
and, to a lesser degree, Elgin, in mind, we turn to the Annexation Agreement.
¶ 54 B. The Annexation Agreement
¶ 55 We next consider the specific language of the Annexation Agreement, reading the
agreement as a whole and with an aim to avoid absurd results. See, e.g., Gallagher, 226 Ill. 2d at
233; Foxfield, 287 Ill. App. 3d at 523-24. We determine that the Annexation Agreement
contemplated that the subject property would be divided and sold, potentially to different
developers, who would be proportionally bound by the Annexation Agreement, which was a
covenant that ran with the land.
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¶ 56 The Annexation Agreement set forth in its introductory terms that the subject property was
to be developed and subdivided. Supra ¶ 7. The agreement stated, throughout, that the property
was to be developed in “stages” or “phases.” For example, section 5 provides that “the Subject
Property will be developed in stages, requiring the submittal of plats and plans for each stage or
unit. *** In the event of a phased development, then each phase shall be complete and comply
fully with all applicable laws.” (Emphases added.)
¶ 57 Moreover, as noted by this court in Yorkville, this sort of division is amenable to practical
application. See Yorkville, 2019 IL App (2d) 180230, ¶ 90. For example, section 14 of the
Annexation Agreement, addressing the irrevocable letter of credit at issue here, is workable in the
event that multiple developers separately owned portions of the subject property. Again, that
provision states that the “Landowner would secure an irrevocable letter of credit *** from a
financial institution payable to the Village to guarantee the quality construction of all public
facilities to be constructed at any unit or stage of development for which approval is sought. The
letter of credit would be in the amount of 100% of the contract costs of construction in the unit or
stage of development or 125% of the Landowner engineer’s contract estimate in the unit or stage
of development.” (Emphasis added.) The Village here sought a letter of credit in an amount
specific to the stage of development, for roads only, not for storm drains, etc., and in accordance
with KPHC’s proportion of ownership.
¶ 58 Also, conferring successor status on the owner of a portion of the subject property here
would not, as the Doyle court cautioned, result in individual residential homeowners being unduly
burdened with municipal development responsibilities. For example, multiple provisions in the
Annexation Agreement clarify that there is an end to any owner’s obligation to participate in the
development of the property. Section 27 provides that the term of the agreement is 20 years. More
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critically, sections 7, 9, and 10, covering the improvements for storm drains, well and water supply,
and roadways, respectively, each provide that, “upon proper completion of [the same], the Village
shall promptly accept such improvements and thereafter maintain such improvements.” Section
13, covering the dedication of improvements in general, also provides that the “Village shall
promptly accept such improvements upon completion of construction of same and thereafter
maintain such improvements.” These provisions show that, following the completion and
acceptance by the Village of any stage or phase of development, the responsibility for the
improvements will lie with the Village and not with any subsequent purchaser, be it a developer
who purchases the property mid-development or a residential homeowner who purchases a lot or
lots from personal use.
¶ 59 Finally, as to the language of the Annexation Agreement, we note that it does, in at least
one instance, more expressly distinguish the landowner and its successors who shoulder the
development responsibilities from future individual property owners like the homeowners in
Doyle. That is, in a portion of section 10, the Annexation Agreement provides that the landowner
is not required to install streetlights. Instead, each lot is to be equipped with a lamppost within 10
feet of the roadway, and occupancy permits will not be issued without said equipment, at which
point the “property owner” of the lot is to maintain the lamppost in accordance with the Village
ordinance.
¶ 60 Given these provisions, we do not share the Doyle court’s concern that, under the Village’s
interpretation, ordinary homeowners will be burdened with the responsibility of municipal
improvements. Rather, it is the adoption of KPHC’s interpretation that would lead to an absurd
result. As KPHC acknowledges, if the landowner had sold every lot but one to a new developer,
in this case 81 of 82 lots, the new developer would not be a “successor” and would not be bound
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by the terms of the Annexation Agreement. This outcome would certainly undermine the public
policy of ensuring that annexation agreements are adhered to so that municipal development may
proceed in an orderly and predictable manner. See, e.g., Orland Park, 135 Ill. App. 3d at 526.
Moreover, given that the Annexation Agreement contemplated the possibility that the subject
property might be subdivided and developed in stages, it would make little sense to interpret the
agreement as no longer applying where a successor developer takes on the development of a
subsequent stage of the development. Indeed, this is an absurdity that would potentially lead to
stalled development, as the successor developer and the Village would have to commence new
annexation negotiations.
¶ 61 In sum, we recognize that the Annexation Agreement, which runs with the land, neither
expressly provides for nor expressly precludes the application of the terms of the Annexation
Agreement when a subsequent owner purchases less than the entire property. However, we
determine that its terms clearly contemplate the possibility that the subject property would be
subdivided and developed in stages and phases, which is entirely consistent with proportionally
burdening successor owners with obligations under the Annexation Agreement. Conversely, of
course, the Village’s obligations under the Annexation Agreement persist vis-à-vis such successor
owners. And while Annexation Agreement, incorporated by reference in the KPHC I and KPHC
II deeds, continues to obligate KPHC for the reasons expressed above, it of course does not follow
that individual homeowners are similarly obligated under the Annexation Agreement.
Accordingly, we conclude that the original parties to the Annexation Agreement intended to confer
successor status on those who purchase a portion of the subject property during the development
phase, a result entirely consistent with the public policy favoring adherence to annexation
agreements and the orderly progression of development. The Village has properly pleaded that
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KPHC is a successor owner of record bound by the terms of the Annexation Agreement and, as
such, its complaint should have survived dismissal.
¶ 62 Given our holding, we need not address the Village’s alternative argument concerning
contractual assignment, nor need we address its claim that KPHC conceded that it was a successor
prior to the filing of the operative complaint. Also, because KPHC is no longer the prevailing
party, we vacate the trial court’s award of attorney fees to KPHC.
¶ 63 III. CONCLUSION
¶ 64 For the reasons stated, we reverse the trial court’s section 2-615 dismissal, remand for
further proceedings consistent with this opinion, and vacate the award of attorney fees.
¶ 65 Reversed in part and vacated in part; cause remanded.
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No. 2-20-0780
Decision Under Review: Appeal from the Circuit Court of De Kalb County, No. 19-L-33; the Hon. Bradley J. Waller, Judge, presiding.
Attorneys Michael J. Smoron and Jennifer J. Gibson, of Zukowski, Rogers, for Flood & McArdle, of Crystal Lake, for appellant. Appellant:
Attorneys Colin W. Anderson and Omar F. Uddin, of Anderson & Uddin, for P.C., of Aurora, for appellees. Appellee:
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